August 21, 2013 § Leave a comment
Seeking feedback is like seeking a punch in the stomach. It’s painful. Entrepreneurs work so hard on their start-up. They take so much risk. There is so much riding on the success. So many promises. Your reputation is at risk. You feel so good about what you are building. And then you talk to customers. And customers focus on what is missing. What they dislike. Some times, this process actually makes me feel physically sick to my stomach.
Guessing right is impossible
Guessing the right product or feature set all of the time is impossible. You simply can’t guess how other people in their own unique environments will use your product. So you have two options:
As you would guess, Dogfooding is a short way of saying “eat your own dogfood.” Apple and Google do this extremely well. They play with prototypes over and over again. Give feedback under the safe confines of fellow employees. They structure the company’s culture around this and thus they produce brilliant products that seem to cover every possible thing you could think of. Creating a beta program helps too. Every company Dogfoods, but to really get unique perspectives you need a significant community doing it, and start-ups don’t have those resources.
The Lean philosophy is rooted in hypothesis testing. In testing ideas and iterating. In seeking feedback from early users. Learning how they use the product. Learning their needs. It starts with the initial product concept, but that philosophy extends to every feature that is built into the product. It is a mindset. And it works extremely well for small companies or teams that don’t have the resources of an iPhone or of Google Labs.
Seek The Pain
The hardest part of an early stage startup is when you find out that your idea/or feature set isn’t what the customers want. It can be so painful. You work so hard and you feel that you are getting closer, and then talk to new customers and realize how far you still have to go. You can’t take it personal, but it is hard. But make no mistake, you have to seek the pain.
I talk to young entrepreneurs all of the time. And this is the #1 mistake they make. They find every excuse to avoid this pain. But really they are just delaying it. The best thing you can do is start this process early. Talk with customers and listen. Test your hypothesis. And be prepared to change.
June 28, 2013 § 1 Comment
Fred Wilson (one of the elite Venture Capitalists) had a great blog post recently on the price war that is happening in the VC industry. In response to the post, I mentioned that price pressure from competitors is nothing new to any business person. His portfolio CEO’s face that all the time. The answer is differentiation. Meaning, provide value beyond cash.
That response started a back and forth with Brad Feld (another top-tier VC) and some other commenters. Some commenters (not Brad) openly questions whether a VC can actually add value to a company beyond a check. While it is true, that only the Founder spends every waking (and often sleeping) hour thinking about, and working on, the business. I do think that great investors can actually add value beyond just a check.
How can a VC Add Value?
Some ideas off the top of my head:
1. Experienced VCs can be great Board Members.
2. Experience VCs are great maximizing value when it is time for an exit.
3. Great VCs can make introductions for business deals.
I am sure there are others, but these jump to mind.
The Most Valuable Service
Point #3 is the one I want to focus on, because I think it is the most under-utilized value add, yet could be the most valuable to all parties. In my opinion, there is a great opportunity for a VC to build a sense of community among its portfolio companies. A network of businesses that are willing to help each other. Additionally, invite executives at companies outside of its portfolio (preferably with big companies) to join this community.
To be clear, I am not talking about sending a few email introductions. I am talking about building a community. Similar to how you feel about your alma mater, or fraternity, or your house of worship. A real sense of loyalty and pride and collaboration.
What would this network do?
1. Use each other’s products. Duh…right? Seems pretty straight forward. But customer validation is so important for any start-up or new product launch. We all work so hard to find our early customers, so a strong network would be hugely valuable. I know how valuable this would be because I have been using the network of one of my alma matters to find early customers. It is an amazing network that has yielded hundreds of meetings based on cold emails through LinkedIn. Imagine if your VC could provide a strong community to a start-up? Hugely differentiating! And it is sitting right there for you.
2. Make introductions. I can’t use your product, but I know someone who might.
3. Be a sympathetic ear. The Founder’s role is lonely. You can’t understand how lonely it is until you are a Founder. Even your spouse doesn’t fully understand it. Only a fellow Founder can. And as a general rule, we love speaking with each other.
What’s in it for Non-Portfolios?
To be immensely valuable, a VC should recruit non-portfolio companies into the network. Preferably executives at big companies (ie with big checkbooks). But why would they join a VC’s network? Pretty simple:
1. Big company execs always need to see what is coming.
2. Some people just love new technology and like to be in the know.
3. People are always looking to build connections that will create career opportunities.
The Greycroft Summit
I recently went to the Greycroft Summit, which is a weekend offsite in The Hamptons of an equal mix of Greycroft’s portfolio companies and senior executives at big companies. We talked about industries, ate great food, drank adult beverages and had a great time. That weekend has produced several hugely valuable sales leads for me. A few of them might become my biggest clients. That is some serious, serious value add.
Now I know that that weekend was expensive, and thus not scalable beyond once per year. And I also know that most VCs do something like this once a year. My point is that there exists an opportunity to extend the camaraderie among the participants in much more scalable ways. One needs not thing too long before you can realize some simple ideas to extend the sense of community beyond the weekend.
I am not a VC
To be clear, I am not a VC. Never been one either. So I have no idea how a VC thinks. I am just a multiple time entrepreneur. I have started (and exited) several companies…i.e. I am your customer. And this is the best idea that I have on how a VC can create value for me.
May 1, 2013 § 1 Comment
Whenever I analyze a salesperson for a job, I first apply the lens of whether she fits the role. There are four possible sales roles:
1. Existing products to Existing customers
This is the easiest type of sell. Not saying it is easy. Just the easiest of the four types. It is the easiest because the key to sales is trust. The first rules of sales is that clients buy from people they like and people they trust. That’s just how it is. So when you hire a person to support/sell to an existing customer, the trust is already established. Now the salesperson still has to maintain that trust and be likeable. But she starts in a good place. On the Hunter-Gatherer spectrum, these salespeople are considered Gatherers. Note, this label is neither a negative nor positive, just a statement of the role and skill set.
2. New products to Existing customers
This is next in order of difficulty. But again, trust is already established with the customer. Therefore, the same salesperson as in role #1 can often fill this role. It is certainly a more challenging process than #1 because the salesperson needs to uncover needs and budget, etc. But since she already has a trusting relationship established, the salesperson can navigate the client’s organization to get this information. This is hunting, but in a friendly forest.
3. Existing products to New customers
This role is orders of magnitude more challenging. As you can guess, the key is still trust. There is no established relationship yet between the sales person and the buyer. Often, the first meeting is the first time that the customer was introduced to the salesperson. But the good news for a salesperson in this role is that since it is an existing product, some level of trust has already been established, ie trust of the brand/product. The salesperson has to demonstrate an ability to find the decision maker, budget holder, need, etc. Also be able to fight off competitive challenges tactfully. The salesperson has to be able to deal with all kinds of issues in an environment which no one is fully on her side…until the deal closes. A salesperson has to find the internal support and manage that person/people like oxygen. This is a pure hunting role. The salesperson has to relish this high risk, high failure environment.
4. New products to New customers (aka startups)
As you would expect this is the most challenging sales role, by a wide margin. Not only does a salesperson have zero trust yet with customers but her company is actually distrusted due to its newness. The first hurdle to cross is “I have never heard of you.” A company has to cross that for the salesperson by solving a real pain point or doing something radically better than an incumbent product. The brand name should be professional and the product should look like it is real. These are no small challenges for a startup. But if the company cannot cross these hurdles, then a salesperson can’t either. This is one of the key reasons that the founder has to be the first salesperson. If a founder can’t sell her product, NO ONE else can/will.
Once this barrier is crossed, the salesperson still has a ton of hard work ahead of her. This is hunting in its rawest form. I mean war paint on your face, dropped in the middle of unfriendly forest type of hunting. This type of salesperson has to thrive in an extreme failure/extreme risk environment. The key skill here is figuring out who the right customer is. Simply put, most customers will not use a startup’s product no matter how great the pain is or how cool the solution is, because of the reputational risk due to an abrupt shutdown. The salesperson needs to find her initial customer sponsor, uncover information and then figure out how to navigate the rest of the organization. And while the company established some credibility with the initial lead, the fact that the product is a startup will come up over and over again. A salesperson has to constantly sell against that risk at every level. Competitive products will come up over and over again. Often referencing competing products is just a cover for “let’s not take the risk on a startup.” A salesperson in this role has to be great at building a large pipeline, because the close rate will be lower than normal. The salesperson has to be an extreme self-starter. No one is going to navigate the day for her. She has to be hungry. Have a fire in her belly. Be passionate about her product and the market. Be knowledgeable too, because the detractors in an organization are going to throw a lot of stones. She will consistently find herself in meetings where there is a very vocal critic. Just looking to kill the deal. That person is often scared of something new, which translates into work for him. And he will work really hard to avoid learning a new product. So the salesperson has to be a bit of a psychologist too. To find a way to make that person feel comfortable. She can’t fight that person. Angry becomes transparent. She has to kill him with kindness, supported by facts. Remember, people buy from people they like and people they trust.
The most important action a salesperson in this role can take is to land a reference-able customer. Someone who is credible and willing to be quoted publicly. This reference will be used over and over in every subsequent sales meeting.
When hiring a salesperson for a role, I believe that that person has to have demonstrated these capabilities in past roles or demonstrated the right skill set. It is important to be open to the challenges with the candidate.
Far too often a salesperson from role #3 will leave a big company and go to a startup (role #4) thinking the skill translates..only to flame out. Certainly some skills translates, but that salesperson has to understand that the challenge is materially greater. To me, the key to a great sales hire for a startup is not only skill set, it is passion. Passion for the product, passion for the challenge ahead of her and passion for working with the team. Ask yourself, has this person demonstrated the passion needed to overcome the extreme ups and downs. Is she a fighter? What motivates her? If she is motivated only by money, as many salespeople are, then do NOT hire that person into a startup. People who are motivated by money are also very, very unhappy with quarterly cash flow swings. Chasing the gold ring is fine so long as her downside is protected. And a startup simply can’t guarantee that. Sure, money is an important factor for everyone. People have to live and pay bills. But to overcome the extreme ups and downs of a startup, the sales candidate has to have a true passion for the mission.
April 5, 2013 § Leave a comment
Culture is everything.
Culture determines who you hire, what products you build, how you build those products, and thus ultimately the value of your business. If you set up the wrong organizational culture you are doomed to failure, no matter how talented individual employees are or how attractive the market you are attacking.
Are Your Winners People or Ideas?
Last night I went to a meetup for Product Managers. We had a 45 minute discussion on the value of arguing in an organization. Note, the topic was on arguing, not debating, but that’s a separate point. What became clear to me during the discussion is that many organizations set up cultures where people are winners or losers rather than ideas. The result of that is that there is a lot of pressure put on picking winning ideas. Not surprisingly, those environments are highly political and thus have a lot of arguing.
There is a BETTER way!
Don’t take it from me, go read Lean Startup. In it, Eric Ries explains the best culture for innovation. Great companies build a culture of testing, rather than arguing. In this culture, everything is a hypothesis regardless of who authors it. Every hypothesis has a key metric that is set (along with the baseline) before the test. Tests are set up to be run as quickly and as labor light as possible. Test are pushed as frequently as possible. The results of the test determine the answer, NOT a person’s ability to out argue (or rather out shout) another person. Repeat this over and over. That is what the word “iterate” means. And in my experience it is the ONLY way to build a product unless you are Steve Jobs, which you are not.
But I Can Make The Numbers Say What I Want
Bullshit! You can’t “massage” the numbers. Set up the measurement of a key statistic and run the test. Give everyone access to the dashboard so they can see the data. No one keeps the data secret and builds a Powerpoint presentation. The data is out in the open.
Continuous Deployment…no Sprints…and certainly NO WATERFALL
To fully achieve this culture, you have to move to continuous deployment. To my understanding Etsy is the leader in this. I highly recommend you read their blog, Craft as Code. When I first heard about continuous deployment, I was very nervous to try this approach. What if a push breaks something big? But once we moved to continuous deployment, I fell in love. And I will never go back. There is truly no better way to iterate on a product. Lord help you if you are still doing waterfall.
Inertia is hard to change. Especially if you are not the CEO of a company, and even then it is really hard (see: Marissa Mayer). If it is too daunting for your organization to make a massive culture change, then don’t start there. Pick a small project or feature release to try this new approach with…I.e. start with a test.
March 27, 2013 § Leave a comment
In my last post I wrote about why I shut down my last product after only 3 months. At that point, I had a decision to make – Give the remaining money back to investors (~25 cents on the dollar) or Start the process over. I gave myself a few weeks to find a pain that needed solving or I would give the money back. At least that’s what I told myself. Realistically, since I never give up, I likely would have given myself more time. But the time pressure helped (as it always does) and within a few weeks, we landed on a problem that needed solutions. Here is the process we took to get there.
Step 1: Define the rules
The first thing I did was re-read Paul Graham’s well written blog post on how to pick a start-up idea. It is very long, so I will summarize it for you:
Solve a problem that you have (ie Dropbox example – lost USB card)
Turn off the filter “could this be a huge idea / will this market be huge”, while being cognizant of business realities (ie AirBnb example)
Crowded markets aren’t necessarily bad idea areas
Founder has to strongly empathize with the product
Build something that people will pay you for / revenue is a true test
Design – solve a pain point and users can look past less-than-great designs for first versions – ship fast – focus on UX over design
Strip down to core product and the pain point it solves – bells & whistles can come from user feedback
I liked it so much that I required the entire team to read it. We then had a conversation about it and agreed that these would be our rules to live by. Anyone on the team can call Bull Shit if we strayed from these rules. We wrote them down on the white board and also emailed them out to everyone.
Step 2: Ideate
With the guidelines set, we all started brainstorming. Everyone had a day to go away and think about pains that needed solving so long as it adhered to these rules. You might be thinking “is a day enough time?” Yes it is. If you can’t figure out within a day a problem that needs solving, then it is not a big pain. Start-ups should only focus on big pains.
The next day, everyone got back together and pitched their ideas. It was kinda like American Idol, where I was Simon. Everyone got 2 minutes to pitch and we gave feedback.
This process was ok, but not perfect. The reality is that any idea had to fit rule #4, meaning, I had to strongly empathize with the product. This reality proved to be frustrating to some team members. Some felt it was a waste of time “to just do what Steven wants to do!” That was a fair criticism, but the process ended up productive.
Killing Good Ideas
We had some very good ideas that ended up getting killed because I couldn’t answer “Yes” to the question “would I hire me to be CEO of that company?” One example was the suggestion that we build a product that helps women get professional coaching on what to wear based on what’s in their closet. Seems like a good idea to me, however, since my wife buys all of my clothes and I wear jeans every day, I don’t think that I belong running a clothing consulting company. Maybe Julie could run it. But she already has a very important job running our family.
The Point of Rule #4
There are very important reasons that rule #4 is there. The reality of any start-up is that:
- Founders are the Chief Evangelist. If a founder can’t sell the product, no one can.
- No one stays awake at night thinking about the product/team/business/cashflow like a founder does.
- Unlike employees, Founders never leave unless they are booted out by the Board, and that is rare.
The Process was Not Completely Useless
While this process frustrated some, it actually proved to be productive. Not coincidentally, Noah (our VP of Engineering) and I came to a similar idea. We also found a few other ideas that fit the rules and merited further research.
Step 3: Customer Research
After narrowing it down to two ideas, we set out to get customer feedback and validate the pain point. We tried to include as many team members in this process as possible. Many teammates joined calls or went out and talked to customers. We reported on our results to the team and kept debating the merits.
Validate with Investors too!
I also included my lead VC (and Board Member) in the discussions. I wanted to know her opinion. Doesn’t make sense to start an un-backable company. Ellie correctly steered me away from one business idea and provided good feedback throughout.
Step 4: Time to MVP
The customer interview process proved fruitful, and by the end of December, we felt good that we identified a pain that needed solving (not coincidentally Noah’s and my joint idea). We also had a rough idea what a solution looked like. We took the last week of December off completely and came back in January ready to build an MVP. I will get into that process in the next post.
March 20, 2013 § 11 Comments
In early 2011 I had an idea. I was planning a trip and thought, wouldn’t it be great if there was an easy way to search all of my friend’s travel content (pictures, itineraries, social data, etc) when planning a trip. A ton of travel content already existed. I knew people would gladly share their travel content with friends. And I knew that we could build a great Lead Gen business off of it once it had critical mass. It was a simple concept in a fun industry. So I took the plunge and started a new company.
In late 2011 we built a prototype and tested a basic product concept. The limited set of testers seemed to like the concept, but the feedback was clear that our site had to be beautiful. The container for the travel content had to enhance the viewing experience to be truly differentiated. With that feedback, I made a decision, that turned out to be a big mistake. The mistake was, that I took the prototype offline and started a 5 month long design and build process (I explain why this was a mistake below). We were sure we had a winner on our hands, we just needed to make the site beautiful.
In May we launched our private beta, and spent the next few months working out the bugs while a limited number of users tested it out. I wanted it to sparkle when we officially launched so I kept it behind a private gate while we added features and fixed bugs. I wanted everyone to be wowed by their first experience with Irrive.
In September we launched to the public and got very good press reviews. The early usage data was promising too. Our sign-up rate for the first 3 months remained around 20%. And the key viral event (the creation of a scrapbook) proved to have a very good viral coefficient, as we had hoped. It was the first version, so we had a lot of plans on how to improve those already decent metrics. But only 3 months in, I decided to shut the product down and sell the code to TripAdvisor for a fraction of what I invested to build it. Why make such a quick decision with decent metrics?
A feature not a business
One of the key learnings in talking to our Promoters was that they viewed Irrive as a product that they would use only a few times a year. And these were our biggest fans!
The simple point is, there are two type of consumer web business models – e-commerce and content. Content businesses need huge pageview scale to build a reasonable advertising business. Same thing with lead generation businesses which is what Irrive was. The flaw with Irrive is that you can’t get scale fast enough when your Promoters (ie your most viral customers) only used your service a few times a year. Irrive belonged as a feature within a larger business (eg TripAdvisor) rather than as a standalone business.
The big mistake I made with Irrive was taking the prototype offline, rather than leave it as the base and improve it incrementally. I made this mistake for good reasons, but that’s irrelevant. Leaving it up and iterating on it would have taught me a lot. The outcome would have been the same, because the model was flawed. But, critically, I would have figured this out 5 months sooner. And that’s big.
“No Points for Second Place Maverick” – Iceman in Top Gun
When you are a start-up, you are under a constant ticking clock. There are no moral victories. When the clock runs out, you are done. No one cares how close you were to building a business but your family. It doesn’t matter how cool your product is. Your goal is to build a business, not a cool product.
So, once it became clear that Irrive wasn’t going to obtain the necessary scale before we needed to raise capital, the decision was easy for me.
Why not pivot?
For those non-start-up types reading this, a Pivot is the business equivalent to what a basketball player does to get away from a defenseman. That is, he keeps one foot on the ground and turns the other foot. A business pivot is the same thing. You keep your roots, but adjust the model slightly.
One of my most trusted advisors suggested we do just that. A guy I really, really respect. So we spent some time thinking about how we can change our product to make people use it more frequently. But that process quickly devolved into an exercise of a Product Looking for a Problem. And that is a recipe for failure. So I shut down that process too.
Capital & Talent Left
The good news is our team was able to identify a problem, and built a cool product that established a loyal (albeit small) customer base. The bad news is we picked the wrong problem. That’s on me. However, we still had enough capital left and a talented team to make another run at it. Returning $0.25 on the dollar just didn’t seem like an optimal option to me. Plus, I am a fighter. I never give up…ever!
So we started a brainstorming process and landed on a new problem that needed fixing. And in January we started over. I will expand on that process and the new product in a future post.
A Founder knows
Deep in their heart, a Founder always knows if they are sitting on a winner or not. With my first start-up, I scraped and clawed for almost 3 years, and ended up with a great outcome. But I knew pretty early that Irrive was different and didn’t deserve the same sacrifice. Irrive’s model was flawed. It was time to start over.
The sad truth is that not all Founders are willing to face the music, and so they ride it out. Until the bitter end. It is a terrible thing to watch. Danielle Morrill is a talented young entrepreneur who wrote a great post on this too. So did Sam Shank. It is important for all entrepreneurs to self reflect. To really ask themselves if they are self-aware enough and self-confident enough to face the facts. That is a question that all entrepreneurs should ask themselves.
August 28, 2012 § 3 Comments
Wouldn’t it be nice if a great wedding meant a great marriage? Oh…life would be so easy. You could just hire the best party planner, invest all of your savings and would be assured a lifetime of happiness. Bummer that’s not true. As we all know, a good marriage requires a lot of work. To have a long-term, happy relationship with one person takes listening, ongoing communication, objective self-reflection and personal adjustments.
I think product launches/ongoing business success is analogous to weddings/marriages. Based on anecdotal evidence, I believe that there is a low correlation between a successful launch and long-term product/business success. So low that I think that too much emphasis is often put on a start-up’s “launch”.
Of course, I am not suggesting that positive buzz and free press aren’t a good thing…they are! What I am suggesting however, is that the emphasis placed on launch is too often overweighted relative to its long-term business value. Releasing your product to the web is like a wedding, it is just the beginning of the work. In today’s highly connected, social world, great products can spread very quickly. And since start-ups never have a great product at their initial launch, they often get very little bang for the launch buck. The emphasis of a start-up should be on building a great product and that takes listening to your users, objective self-reflection and continuous adjustments…just like a marriage.
To that end…I need your help.
Please try out my product, Irrive.com [<<< click on this link to get past private gate]. Tell me what you think by sending me an email, email@example.com. Don’t hold back. I have very thick skin. Just keep it constructive. Tell me how to make the product better for you. What is confusing? What is a useless feature? What features would make your life easier? I am ready to listen, reflect and adjust.